Despite potential macroeconomic challenges, the tech industry’s long-term prospects are promising due to digitization, increased reliance on technology, and emerging technologies such as AI and blockchain. Amid this backdrop, it could be wise to keep an eye on fundamentally strong tech stocks Accenture plc (ACN), Leidos Holdings, Inc. (LDOS) and Stratasys Ltd. (SSYS).
Before delving deeper into their fundamentals, let’s discuss what’s happening in the tech industry.
According to Gartner, global IT spending will reach $5.10 trillion in 2024, an increase of 8% year-over-year. The growing need for digital transformation across industries is driving this surge in IT spending. The IT sector is likely to increase significantly in the coming years as businesses continue to prioritize technological investments.
The global 3D printing industry is expected to reach $105.99 billion by 2030, with a 24.9% CAGR. The growing digitalization and use of modern technologies such as Industry 4.0, smart factories, robotics, and ML will likely boost demand for online 3D printing for simulation purposes.
Also, the IT outsourcing market is estimated to grow at a CAGR of 3.7% to $701.88 billion by 2028. Moreover, investors’ interest in tech stocks is evident from the iShares U.S. Technology ETF’s (IYW) 10.6% returns over the past three months and 20.7% over the past six months.
In light of these encouraging trends, let’s look at the fundamentals of the three above-mentioned tech stocks.
Accenture plc (ACN)
Based in Dublin, Ireland, ACN is a professional services company that provides strategy and consulting, interactive, industry X, song, and technology and operation services worldwide.
On November 16, 2023, ACN announced that it had agreed to acquire Solnet, an IT services provider for the New Zealand government and private organizations across multiple industries. The acquisition of Solnet will further strengthen ACN’s presence in the New Zealand market and expand its portfolio of IT services.
On November 14, 2023, On November 14, ACN and Workday, Inc. (WDAY) expanded their collaboration to help organizations accelerate skills-based talent strategies. The collaboration aims to leverage ACN’s expertise in workforce transformation and Workday’s innovative technology platform.
ACN’s trailing-12-month ROTA of 13.41% is significantly higher than the 0.07% industry average. Its trailing-12-month ROCE of 28.75% is significantly higher than the 0.80% industry average.
For the fiscal fourth quarter ended August 31, 2023, ACN’s revenues amounted to $15.99 billion, up 3.6% year-over-year. Its net income and EPS amounted to $1.41 billion and $2.15.
Also, as of August 31, 2023, total current assets came in at $23.38 billion, up 8.2% from $21.61 billion as of August 31, 2022.
Analysts expect ACN’s revenue to increase 3.7% year-over-year to $66.47 billion for the year ending August 2024. Its EPS is expected to grow 4.6% year-over-year to $12.20 for the same period. It surpassed EPS estimates in all four trailing quarters. Shares of ACN has gained 25.3% over the past nine months to close the last trading session at $334.04.
ACN’s POWR Ratings reflect this promising outlook. The stock has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
ACN also has an A grade for Quality and a B for Stability and Sentiment. It is ranked #3 out of 9 stocks in the A-rated Outsourcing - Tech Services industry. Click here for the additional POWR Ratings for Value, Growth and Momentum for ACN.
Leidos Holdings, Inc. (LDOS)
LDOS together with its subsidiaries, provides services and solutions in the defense, intelligence, civil, and health markets in the United States and internationally. It operates through three segments: Defense Solutions; Civil; and Health.
LDOS’s trailing-12-month ROTC of 8.10% is 17.4% higher than the 6.90% industry average. Its trailing-12-month asset turnover ratio of 1.17x is 46.8% higher than the 0.80x industry average.
LDOS’s revenues came in at $3.92 billion in the fiscal third quarter that ended September 29, 2023, up 8.7% year-over-year. Its adjusted EBITDA came to $451 million, up 21.2% year-over-year.
The company’s non-GAAP net income grew 28% from the year-ago value to $283 million, while its non-GAAP EPS increased 27.7% year-over-year to $2.03.
Street expects LDOS’s revenue to increase 5.9% year-over-year to $15.25 billion for the year ending December 2023. Its EPS is expected to grow at 6.8% year-over-year to $7.05 for the same period. It surpassed EPS estimates in three of four trailing quarters. Over the past six months the stock has gained 32.4% to close the last trading session at $106.76.
LDOS has an overall B rating, equating to a Buy in our POWR Ratings system. It has an A grade for Sentiment and a B for Growth, Stability and Momentum. It is ranked #8 out of 74 stocks in the Technology - Services industry.
Beyond what is stated above, we’ve also rated LDOS for Value and Quality. Get all LDOS ratings here.
Stratasys Ltd. (SSYS)
SSYS provides connected polymer-based 3D printing solutions. It offers a range of 3D printing systems, Fused Deposition Modeling (FDM) printers, stereolithography printing systems, origin P3 printers, and SAF printers for manufacturing, tooling, rapid prototyping, and various vertical markets.
On November 7, 2023, SSYS announced that Toyota, a global leader in automotive manufacturing and innovation, has signed an agreement to be the first customer to purchase the new, cutting-edge Stratasys F3300 3D printer. This strategic partnership between SSYS and Toyota highlights the growing demand for advanced 3D printing technology in the automotive industry.
For the third quarter ended September 30, 2023 SSYS’ net sales came in at $162.13 million. Its total current liabilities came in at $200.43 million for the period that ended September 30, 2023, compared to $210.65 million for the period that ended December 31, 2022. Also, its total liabilities came in at $298.62 million, compared to $300.36 million for the same period.
The consensus revenue estimate of $658.30 million for the year ending December 2024 represents a 4.5% increase year-over-year. Its EPS is expected to grow at 145.5% year-over-year to $0.32 for the same period. It surpassed EPS estimates in three of four trailing quarters. SSYS’ shares have lost 3.6% over past month to close the last trading session at $11.16.
SSYS’ fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, which equates to a Buy in our proprietary rating system.
It is ranked first among the 7 stocks in the Technology - 3D Printing industry. It has a B grade for Growth and Momentum. To see additional SSYS’ ratings for Value, Stability, Quality and Sentiment, click here.
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ACN shares were trading at $332.85 per share on Monday morning, down $1.19 (-0.36%). Year-to-date, ACN has gained 26.72%, versus a 20.18% rise in the benchmark S&P 500 index during the same period.
About the Author: Rashmi Kumari
Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master's degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions.
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